tausche, sitting in for the vacationing becky quick. we've got a lot of headlines this morning. let's start with the biggie. the obama administration now warning of a mid-october default deadline. treasury secretary jack lew saying that the government is going to exhaust its borrowing capacity at that point, and then it would be left with about $50 billion of cash on hand. he warns that amount could conceivably be wiped out in one single day. our own john harwood's going to be sitting down with the treasury secretary for an exclusive interview and we're going to have that and bring it to you at 7:30 a.m. eastern time. in other washington news, the white house preparing to release intelligence evidence alleging the use of chemical weapons by syria. secretary of state john kerry called last week's attack a "moral obscenity," and he's laid out the case for a u.s. military response. >> anyone who could claim that an attack of this staggering scale could be contrived or fabricated needs to check their conscience and their own moral compass. what is before us today is real,

and it is compelling. so, i also want to underscore that while investigators are gathering additional evidence on the ground, our understanding of what has already happened in syria is grounded in facts, informed by conscience and guided by common sense. >> uncertainty about the possible military action against the syrian government is helping lift oil prices near a five-month high. and also, some new numbers on the massive california rim wildfire that continues to burn out of control. crews now have 20% of the fire contained. that's the good news. but it's still fanning out across the mountains in multiple directions, and the forecast calls for strong winds over the next couple of days, so that has some people anxious as well. in the meantime, i'm going to send it over to kayla with corporate headlines. kayla? >> hey, andrew, it's a big morning for earnings, a lot of company news. bill ackman has sold his stake in jcpenney after his campaign

to overhaul the retailer failed. he sold approximately 18% of the company to citigroup. the "wall street journal" reports ackman sold his stake for $12.90 a share, and of course, citigroup as an underwriter would then have the option to resell those shares. also, best buy finder richard schultze plans to start selling his stake in the company later this year. a regulatory filing shows he informed the electronics chain about his plan, saying the move is part of his personal long-term strategy for asset diversification and liquidity. and best buy shares have, of course, been rising just about 100% in the last year. and in other investor news, dan loeb's third point revealing it's boosted its stake in sotheby's to 5.7% of the company. third point says it would look to talk to management and the board. of course, this is the second fund or active manager to take a stake in sotheby's. nelson peltz's trian management also did that in the second quarter, so certainly will be interesting to watch that stock.

ticker bid. joe? >> sotheby's. sotheby's. um, wow. >> i clearly mispronounced it. >> no, no. you've got to -- can you lock your back -- sosotheby's. >> i need some cotton balls. >> long island lock jaw, or, yeah, there's a part, one particular part of long island where, the north shore up by piping rock. do you know where i'm talking about? >> i know long island iced tea. >> long island iced tea. i still have my buttons, my jcpenney buttons that bill ackman -- those will be worth something, don't you think? the buttons that he brought in that were going to turn the company around. >> lehman brothers -- >> and other stuff. i had a new coke advertisement. let's check on the markets this morning. ugly. and i guess that has to do, again, with -- it was worse earlier, actually, but i guess it has to do with syria potentially, because the ten-year is suddenly behaving a little better. oil is also problematic, that's like a tax on everyone else.

after that durable goods order, we don't need any headwinds for the economy right now. let's check out the ten-year, which is behaving a little bit better. that should have helped. and it did help initially yesterday, until you saw secretary kerry make those -- that was the best, i thought of -- he really sort of moved me on his -- >> did he? >> he did a little bit. he looked very diplomatic, statesmans-like. that was good. anyway -- >> how could you not be, though, when you're talking about. >> i know, i know. i'm not sure what to do. i'm not sure what to do. we can't -- there's times when we say we can't police the entire world, but then i saw some of the testimonials from some of the children, just please, you know, please, president obama, help us, don't, you know, years from now i don't want to say, you know, you had a chance to do something and you didn't help. so, i don't know. i don't know what we do there. going to check out the dollar quickly and then we'll go to the gold board, which, gold is back up above $1,400.

the dollar hasn't seen a lot of interesting action recently so much. we're about 1.33 on the euro, but there's gold, which is now close to -- see either in a bull market or close. time for the "global markets report." i may have been pronouncing this guy's name wrong for a while. ross westgate is standing by in london. you've been there so long, are you french? am i saying that wrong? >> no, but i went to france. >> when's the last time i saw you? maybe it's because i was on vacation. i mean, you are a sight for sore eyes. it's been a while, hasn't it? >> yeah, i just took like a two-week vacation. i don't know, that's -- >> two weeks? two weeks? when you're on vacation -- >> that's nothing in the uk. he should be taking five. >> yeah! >> do you go -- let me guess, portugal? >> no, france. >> oh, yeah, i got it. i nailed it. i got it. all right. so, i was right, huh? yeah, good. >> yeah.

>> awesome. how was it? >> it was good. >> he's so busted. >> he looks like he wishes he were still there. >> he's so busted, he doesn't know where to go with this. that would be my country of choice probably, too. we love -- you know, we don't care that they have no economy left because it's so beautiful. ♪ and the food is so -- >> the rose and the food is very agreeable, i'll tell you. so is the weather as well. not quite as agreeable, joe, as -- i love the music -- not quite as agreeable as this wall behind me. dow jones stoxx 600 only 10-1 -- sorry, 9-1 declines out-pacing advancers at the moment. risk aversion trade very squarely in. not quite at the session low but near as far as can be concerned. the uk on a holiday yesterday, which is why i took the extra day as well. why not? but it is down today. ftse mib's up 1.5% along with the xetra dax, ibex down 1.33%

and ftse mib down 1.5% as well. i'll bring you antofagasta, the mining company down 2.7%. more for the comments that the ceo gave us earlier today, saying we're worried about an oversupply of copper because china demand is slowing, and that could weigh on prices until 2016. take a look at copper prices. gold is higher, as joe was talking about, around the $1,400 mark. and brent and nymex are higher as well, but copper was not there. but copper is firm. spot silver at the moment, but i'll tell you, copper is lower today. sor sorry. on those comments as well from antofagasta. let's show you bond yields. we've had a couple pieces of news out today. the german business ifo index probably the most important sentiment survey out of europe, better than expected. coming in highest since april of last year. that didn't help out the german market. bond yields are low because of the risk-off trade. and auctions out of spain. the t-bill auction went fairly

well, they raised more than expected. yields lower. yields in spain as a result on the cash market are lower. at auction, costs at a two-year debt sale, coupons rose a bit after berlusconi's party, pdl, said that if they threaten to eject berlusconi from parliament because of his tax fraud conviction, they may try and break up the italian coalition. so, the cost of money at a two-year auction going a little bit higher today as well. that's where we stand. back to you guys. >> ross westgate, looking tan and rested. very nice. very nice. we have a little bit of other news for you this morning. apple reportedly preparing its iphone trade-in program. joe, are you going to do this? you just got an iphone, so you might or would you trade in for the 5s? it was originally supposed to launch in june, now reporting that apple's begun sharing details on the initiative. apple customers will be allowed to trade in their used iphones for credit towards a new iphone. >> i think i maybe have the most imperfect iphone timing ever. it seems that i always choose

to -- >> you just bought an iphone? >> either my upgrade is ill-timed or i choose to pounce on the upgrade a month before the new one. >> why would this be better? >> because you would take your phone -- why would the 5s be better? we haven't seen it. it's coming out on the 10th of september. >> one thing i'd like them to fix -- >> the keyboard? >> take that smart-ass siri and give her a little manners, and just, if she doesn't know -- for me, she always gives me some smart answer. >> i think siri's been drinking on the job. >> she has. >> she's been not so great for me. >> hold on. here's my phone. stay where you are. hold on. >> this is unprecedented. this has never been done before. this is, like, why, do you have -- >> going into the dark -- >> do you have something better -- >> come over. i just want to show you this. i'm sorry. i saw this yesterday and it blew my mind. you know how on google, you know how google glass, you know how we always talk about google glass? >> yeah. >> to get google glass to work, you have to say "okay glass."

that's the phrase. >> okay. >> open sesame. >> if you say "okay glass," watch this. can you get this? okay, glass. >> the glass is half empty. enter. >> so, and -- >> that's what i'm saying. >> it's very smart, but it gets worse. okay, glass. >> stop trying to strap me to your 5 enter. it won't work. >> am i right or am i right? she is a -- >> she's a smart ass. can we say that? i want somebody to say yes, mr. kernan, your hair looks great today, mr. kernan, something like that. >> although it would help if she did say that, probably. >> yeah, i want her to. i do! i want her to be nice! she's not nice. i mean, if i'm going to talk to a machine -- >> it is going to get better apparently in the next better? the voice. >> oh, it is? >> they say the voice will

become less robotic, more natural. it will say joe -- >> like sean connery telling you how nice you look. >> so, joe, have you been working out? things like that. our newsmaker of the morning, he looks good, treasury secretary jack lew. he'll sit down with john harwood at 7:30 eastern. john will join us from washington with a -- oh! he's right there. i want to talk about the other thing, larry summers. you are the man! you are the man. who was your source? can you tell us that? >> hey, joe? >> yeah? >> before we get there, can i just suggest to you, you might be able to get that app that trades siri for miley cyrus? she'll talk to you on your iphone that way. >> yeah. >> ow. >> i'd like a twerking iphone. will that -- man, that got a lot of play. >> she's only 20 years old, come on. >> it works so well. whoever her manager is, i want to hire him, but should i twerk? do you think that would help? maybe i could get on tv -- >> no, please, do not. >> i don't think this will work. >> is there anywhere that i can

do that now? >> john, someone inside -- i'll tell you what, this -- i'm not under any false illusions that larry summers will be that much less keynesian than janet yellen or accommodative. i know he's a big stimulus guy. but just that obama, president obama decided not to do the politically expedient thing, i'm so -- if you're right, if your source is right, because the left really hates larry. and for the president to do that, it's like i'm doing what i think is right and i don't care what you think, because the people that think that larry was the deregulatory guy, mr. cdo and all that stuff. this is a bold move, and i like it. >> well, let me just make clear, my source, and i talked to a couple yesterday who expect larry to be named by president obama, don't know that. they're reading the tea leaves. >> oh. >> we talked about this before. >> uh-oh. >> they, the number of people who actually know what the

president's going to do and when he's going to do it is pretty small, but there's a wider circle of people who are in touch with some of those people and who draw some conclusions. so, that's the basis for this. one source predicted that this would happen in october. the other said within a couple of weeks. this has gone on for a long time. it's been an unusually high-profile round of speculation. we haven't really seen this to this volume in the past, but the indications are that the president is leaning toward larry. >> good. >> and if he does make that choice, you're right, he will have picked someone with whom he went through the fire of the financial crisis, just after president bush went through it with hank paulsen, who andrew's got a nice piece -- >> we're going to talk about that. >> -- interview today. but you know, there was a level of trust built in there. and remember, you know, larry summers had a lot of trust from bill clinton and bob rubin,

people who had a lot of credibility during the 1990s, so this is a very capable person. janet yellen also a capable person but doesn't have as close a connection to this president and this president's team as larry summers does. >> but john, you know, your report went so far as to say that summers is being vetted and that that vetting process is what could take the next few weeks. is it possible that the administration could be vetting two people at once? how would that work and what are the politics around that? >> yes, sure it is. larry summers, because he left the administration, and we've seen some coverage of who's paying him since he has left and the employment situation he's gotten himself into, all of that has got to be vetted for conflicts and that sort of thing, but that doesn't mean that only one person is vetted. no, they could be vetting multiple people at the same time, just as a president vets multiple potential vice presidents during a campaign year. >> well, you could sort of see it happening, john, and i am not

surprised, because at first he was sort of floated, and then the left pulled out all the stops. there was a day, "the huffington post" had six straight articles that said larry summers is the devil. i mean, one after another came down. then people say yellin's better, "the economist" wants yellin, then you hear from the white house summers. then someone else says yellin, yellin, yellin, then you hear from the white house summers. kept hearing summers. >> joe, honestly, i'm confused by the opposition of the left to summers. he has been a mainstay -- >> that's something for you to say, john. simpatico. >> he's been a mainstay of democratic governmental economics for a long time. i first met him in 1988 when he was michael dukakis's economic adviser. >> ooh. >> yeah. and he's been right there the entire time. and you know, there are people who go after the deregulation that he was part of during the clinton administration, same people who loved bill clinton's speech at the democratic convention for president obama

this year -- >> ralph nader called him a mega millionaire today. >> and how he lost his job at harvard, all that sort of stuff. >> ralph nader called him a mega millionaire. is there anything worse you can call somebody than wealthy, andrew? not from a knowledge perspective -- >> yeah, there's one thing worse you can call someone. >> what's that? >> you can call him a deadbeat and that's what jack lew will talk about in our interview this morning, the need for congress to raise the debt limit. they sent a letter yesterday to congress saying mid-october is when we hit that "x" date that we'll only have $50 billion in cash, and we're getting ourselves ready for two simultaneous standoffs, one over government funding and the sequester and the other over the debt limit. and our interview with jack lew is going to be one of the beginning volleys in the really serious phase of that. >> okay, john. sounds terrific. ask him -- obviously, ask him also while you have him, mr. summers. i also want to know, if they take summers, does janet yellen leave? what's the calculus there?

but that's a separate issue. anyway. >> you would think. >> that she would leave? >> second banana for another term or two, i don't think, does she? all right, john harwood, thank you. we'll see you. >> and that interview, of course, is at 7:30 eastern. coming up, though, why facebook friends could impact credit ratings. plus, if you've ever sent a text message in the middle of the night, you'll want to hear the story up next. >> this is the craziest story, crazy. >> it is crazy, but it is -- >> it is a nice tease. >> alex wallace joins us from the weather channel with a look at the national forecast. alex, good morning. good morning to you. we're tracking some storms this morning moving across the great lakes. you can see this activity really crossing wisconsin into lower michigan, holding together here for us, trying to make a run for detroit. so, maybe a little later this morning a few rumbles of thunder will be sneaking in there, and that's actually going to be the zone where we could be looking for some severe storms. anywhere in the red, central wisconsin back down across into portions of the upper ohio valley. we'll look for the main threats

to be damaging winds and a bit of hail, but we can't completely rule out the isolated tornado either. south of all of that, it's the heat. that continues out there for us. we've got heat advisories, excessive heat warnings minneapolis down towards des moines. des moines's going to be a spot that we'll be talking temperatures getting up into the 100s, all thanks to this big ridge of high pressure that's in place. temperatures 10 to 20 degrees above average. so, that puts us well up into the 90s in many of these areas, and look at omaha, 100 degrees expected for today. so, a take it easy day in midwest. meanwhile, this big ridge is going to eventually slide into the south, so areas that have been on the cool side are going to start to heat up. more "squawk box" is coming up. nascar is ab.out excitement but tracking all the action

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welcome back. it's time now for the "executive edge," our daily segment focused on giving business leaders a leg up. and you know, we're approaching the five-year anniversary of the financial crisis and the government response coming up, about two weeks. if you think the collapse of lehman is that anniversary. in my "the new york times" column this morning, we looked at t.a.r.p. and i talked to hank paulsen about his misgivings about bank bonuses. he rarely talked about this before, and speaking about the payouts, paulsen noted in part -- "to say i was disappointed is an understatement. my view has nothing to do with legality and everything to do with what was right and everything to do with just a colossal lack of self-awareness

to how they were viewed by the american public." and you know, guys, hank paulson has not come out and talked about the bonuses in a forceful way. looking back five years, now he suggests that those bonuses are one of the reasons that the public hated the bailouts, which he, of course, worked so hard to support, and i think that he tried to keep it, you know, hold his tongue on all this for a very long time but decided now he might come out and explain what he was thinking about. >> you know, andrew, i'll play devil's advocate on this because you think about a lot of bankrupt companies like american airlines, for instance, got a lot of flack earlier this year for bonuses and big payouts that it paid to all of its executives. and its defense was, listen, we won't ever be able to exit bankruptcy as a viable company if becan't keep these employees on. and when you're in a corporation that has that bad of a reputation and is in those dire straits as it is, you could argue that to be able to -- >> that's what they argued back then. >> -- keep the workforce, you have to. but these payouts were bigger

than any other industry. >> i'll take a different take. it's all here in your article, andrew. it's what you decided to emphasize is what i have a problem with in terms of burying the lead. what he's basically saying is they wanted everyone to participate in the bailout, otherwise it wasn't going to work, there would be a stigma. >> that was the whole issue. >> to get it done, they couldn't have asked for restrictions. >> right. >> so there was no chance they could have. >> yep. >> but this is after the fact that the bonuses were paid. >> yep. >> why didn't you lead with, i believe that the root cause of every financial crisis is flawed government policies, and it was the case in that one as well. why wasn't that the lead? now there's no one in this country at this point that hasn't heard that it was all the banks' fault and all the greedy executives' fault. i would have led with that. in "the new york times," could you have put that? "the root cause was flawed" -- >> i know that flawed government policies is redundant, but if that was the headline, could that not have been the lead?

>> it very well could have been. >> but it wasn't because it's a rorschach. i see one thing from these comments and you see another. >> no, no, i'll tell you why, just to give you the news judgment. people have been asking him questions about these bonuses for a very long time and he used to generally not say too much. he's occasionally said that he thought bonuses were out of whack or this or that, but he's never really explained how bad he felt about what had happened afterwards. and i thought that was actually the valuable news -- >> but i'm back to your well-written article here. the reason he didn't pile on with the bonuses was because banking is not only a very honorable profession -- >> yes. >> -- he says, but a very necessary profession -- >> yes, i agree. >> that was not in the headlines either. so you know -- >> joe, also, when -- >> you've got to read andrew's article. you know how they put the least important stuff, i guess, at the very bottom? it's a pyramid thing, right? >> i'm just trying to explain -- >> but the first iteration of t.a.r.p., subtract five years, that was 2008. this was under the bush

administration, they wanted to get it done. remember where the economy was there? i can understand why they didn't put anything in place, but you could always look back and say going forward as we add more payments on to this, we shouldn't have this policy. >> andrew, i feel bad for hank. >> it takes two to -- >> it was probably after offhand comment. little did he know -- i'm surprised your paper actually didn't put it on the front page. >> true. >> has your column ever been on the front page? >> it has. >> this would have been the time to do it. >> thank you, joe. we're moving on. >> paulson hates bonuses. >> we have other stories to get to. could facebook friends change a credit score? it is possible. this is a crazy story. a few tech start-ups are using social data to determine the risk of lending to people who have a difficult time assessing credit. for example, one company deems you, if you are friends with somebody on facebook who was late paying back a loan to that same company. so, guys, is the company you keep affecting your credit score? >> i'm defriending bernie right now. i should have never -- >> i think if there was ever a

reason to go on a big unfriending spree, this was probably, if there was one time when you could get a freiburger king whopper for unfriending people, i think this is only second to that to get more people to lose more friends. yeah, they talked a lot about having additions to fico, about how renters should be able to be judged for how reliably they pay rent and cable bills and that sort of thing, car payments. there's a lot of stuff that isn't actually included in your fico score, but that's not to say just because you're friends with someone on facebook that you should have -- >> joe, we talked about this article about six months ago. there was a piece, i don't remember where, that talked about who people were dating based on credit scores. >> yeah, right. >> that was a determinant whether you would get the date. >> did you see steve cross's piece sunday? >> i did not. >> it was on experian, transunion and whatever. it was unbelievable. it was unbelievable. there are people that had bad credit based on someone that wasn't even related to them, that didn't even have the last name. you cannot get that off your credit report.

the people have no interest in getting it off your credit report. you'd have to go to the ceo of experian or transunion or a place to get it off and they won't talk to you. it never gets passed up the chain. i watched it in absolute flabbergasted watching the piece. >> there was one beginning part of that story that "60 minutes" actually ran in october when the cfpv was first starting to evaluate credit scores and how much errant information was actually on your report. >> never get it off. >> you can never get it off. well, every seven years is rolls off, right? >> i don't know. i guess, maybe. but it was just unbelievable how they have no interest. they don't make any money by helping the actual people that could get the errant information off. >> yeah, but that's -- you're not on facebook, right? too many cronies. >> facebook? you know, i don't know. i just can't -- do men really facebook, andrew? i mean, i don't -- when's the last time you did something on facebook, seriously? >> i go on probably every other day, but i don't actually post -- >> you're posting things and

sharing your life with people? >> not really. >> he's just stalking. >> just for you, joe. just for you. we have a final story, and this is crazier than the last. you've heard of sleepwalking, sleeptalking and sleepeating. now there's sleeptexting, and it's becoming apparently a nightmare for some cell phone addicts. sleep disorder specialists report that there's an alarming trend going on, and you can obviously cause some embarrassing situations. in addition, sleeptexting may be causing health issues, because in many cases it happens about two hours after a person falls asleep. that's when deep r.e.m. sleep would normally begin. you've heard of drunk dialing and booty calls at night. this is like -- >> you combine -- what's that powerful sleeping pill that causes people to do crazy stuff? >> ambien? >> ambien? you combine that with texting and you're, i'm thinking selfie wiener shot, that i could totally say i had no idea that i did that. >> but the fact that you could

type while you're sleeping, that's pretty intense behavior -- >> there are some people who wake up in the middle of the night to write their dreams down. i don't do it, but there are people who do weird stuff like that. i don't know, they -- >> i find this hard to believe. i can't believe -- >> they said in this article, though, the people most susceptible to this are those who leave their cell phones on at night. i mean, who doesn't do this? that's my alarm clock. if i do get an important e-mail in the middle of the night, i want to be able to answer it. >> not me. >> i've done the opposite, where i've gotten a text in the middle of the night and looked at it and thought i responded to it, or an e-mail, rather -- >> see, it could happen to you. my phone's nowhere near me. it's for people texting a lot. i play a little brickbreaker in my sleep occasionally, but i don't text enough. >> is that when your high score comes, middle of the night? >> that's a long story. i got so good, i didn't even try for the high score. >> they don't have it for iphone, do they? >> he's using the old --

>> they have it, but it's no fun. i don't play it. >> that's your "executive edge." coming up, more news, including bill ackman throwing in the towel on jcpenney. we'll get the street's reaction. then, next hour, treasury secretary jack lew in a cnbc exclusive with that handsome man, mr. harwood, at 7:30 eastern time. we're back in a second. ♪

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♪ well, you know that it's going to be all right ♪ ♪ i think it's going to be all right ♪ ♪ everything will always be all right when we go shopping ♪ good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin. kayla tausche is sitting in for the vacationing becky quick. we're going to talk about a lot this morning, including probably not going to talk about the twerking with -- we' >> we're not? it's over? >> you know how people who work on this show think they're funny. the director has been, like, just -- >> going to twerk? >> -- just quietly saying, you know, joe, if you did want to twerk, we do have some music ready, if you want to. not that -- i hear it ♪ i'm not going to. he's trying to induce me -- >> to twerk.

>> yeah, which would last forever. >> did that music not get you going? >> did you see, "in and out," kevin kline? this is how i dance. watch my fingers. >> in the club? >> this is how i dance. and that's all i will do. >> can you dance while you're sleeping? >> now, in the movie, it starts like that for kevin kline and he goes absolutely crazy, but i'm not doing anything more than this. >> you're sticking with that? >> will you twerk? i won't ask you, because i think that would be sexist if i ask you, but will you twerk for us? >> and because you know i'd be the best at it probably. >> i'm not even, you know -- >> i'm going to get in a one-piece by the end of this thing. i'm going to stick my tongue out and it's going to be really -- >> would you put on the borat bathing suit and twerk? >> that's pretty much what miley cyrus was two nights ago. >> i know. you know, here we're still talking about it. what's her agent? what's her agent? it was the same agent as britney. i read something that if ten years after this -- >> have they done that this morning? they're probably on the west

coast -- >> ten years after britney did some, kissed madonna, she was getting $15 million to be on, i don't know, one of the talent shows, $15 million a year to be on it. so, if miley can do that well ten years from now that the agent knows exactly what he's doing. among the stories we're talking about, i'm not so sure he always knows what he's doing. bill ackman sold his entire stake in jcpenney after his campaign to overhaul the retailer failed. it was all was involved with putting in, hinging on this johnson guy, really, wasn't it? that he was a genius from apple and could repeat it there, and he didn't. courtney reagan joins us from the nyse. hey, courtney. >> hi, good morning, joe. that's right, 19 months ago pershing square's bill ackman came on "squawk box" calling them jcpenney's ceo ron johnson magical, and the day the retailer's transformation plan was announced the most important day in retail in 25 years. ackman bet big on the turn around, but now the bet is off. they are selling the stake in jcpenney to citigroup, the bank marketing the shares to fund managers for a reported $12.50

to $12.90 each, below monday's $13.35 closing price. ackman began to build that 39 million share stake in 2010 and '11, buying shares for an average price of $25, which means the fund stands to lose nearly $500 million or about half of that initial investment in jcpenney. ackman resigned his seat on penney's board earlier this month after a very public disagreement over the company's leadership. jcpenney had no official comment for cnbc about the sale, but the retailer couldn't have been surprised about the move. shortly after ackman's resignation, an s.e.c. filing explained that jcpenney would allow pershing square up to four stock sales per year as long as each was for 5 million shares, so you have to think this was anticipated at least in some way. the big questions now are whether the other large investors follow ackman's lead. whether or not jcpenney will need to raise more question. steven roth is a current board member and sold nearly half his stake already in march. now soros fund management is to become the largest investors

with a 9.1% stake followed by perry capital at 7.3%, which recently sided with ackman's recommendations in that very public board battle over those letters. andrew? >> okay, courtney, stay with us. don't go anywhere. we'll bring in the ceo and chief research officer at the intelligentelci advisory group. dana, where does the stock go from here? >> overall it needs to have results. it needs to have same-store sales. it's getting closer to flat than the negative 12% and they're going up against a negative 26% to negative 32% through the back half of the year. >> is this a positive development? is this a negative development? do you say there was going to be an overhang on the stock and the good news is they just cleared that overhang out in one fell swoop? or do you say to yourself, if he's willing to take a loss at this point, that's bad news for everybody? >> i think your first scenario's more likely. i think it was disruptive in terms of what was going on. you have to be able to get the

company to some sort of level of stabilization. it was challenging to do that with the boardroom fights happening on main street. and now the holiday season is coming, the most important time of the year for the company. they're trying to get the home department fixed and focus and concentration is the key. >> courtney, the view inside jcpenney, they're happy to see mr. ackman gone, not just as a board member, but also as a shareholder? >> you know they're not going to say anything publicly in that vain, but you have to think they are at least a little happy that the distraction is gone. even ackman himself called what he had been doing a distraction. he did believe in what he was saying, and those of us that believe in activism do think that it is a good thing to speak out when you truly believe in something. clearly, he had money on the line. it just didn't work out. but like dana said, you have to assume they really need and want to get back down to business, make sure that those vendor relationships are very strong. that's a key, key part of jcpenney's potential success going forward. you cannot have vendors pulling out, and that would create a very dangerous domino effect. as of right now, that has not

happened. jcpenney needs to make sure that is the status quo going forward. >> dana, help me with this. the next time bill ackman announces that he is targeting a retailer, he comes on "squawk," he sends out a press release, he does whatever he does, how does the market react? >> i think they think it's very disruptive. he himself said that his poor retail investments have not gone as well, that it's not been a sector that he's been enamored with, that he's had as much success at, so he should focus on other areas, given the fact that retail has been a challenge. >> dana, when you think about jcpenney, though, is this the end of the beginning or the beginning of the end? because it seems like you have a lot of selling pressure, you have a lot of pressure on same-store sales. how much time is the market willing to give jcpenney in this scenario with two big seasons coming up and then not a whole lot after that? >> i think what the market wants to see is just that the same-store sales and that there's positive momentum going forward, that it's getting less worse and that less-worse

scenario happened in the second quarter. you need it to happen in the third and fourth quarter. what you mentioned about the private brands is key. arizona, st. john's bay, names that the jcpenney customer was familiar with but they didn't have is now being brought back into the fold in a big way. >> final question, dana. if you could buy any retail stock right now, which would it be? >> i think the one that has momentum, i think gap will continue working. i think they've got their house in order. >> wow. >> the product is better, the margins are better. >> okay, we'll leave it there. dana, thank you for that. courtney, thank you for your report from the new york stock exchange. see you soon. coming up, we're going to talk about video games. did you see the "daily news"? >> i did. >> it's early to be carrying hillary's water, is it not? i mean, look at this. this is a blatant example. christie is by far one of the most popular politicians in the country right now. this is a major new york newspaper. "who you calling an idiot fatso?" even "the new york times," although they'd like to crush christie as well, but they would

not do this, would they? this is pure hillary, because it's probably going to be hillary -- could be -- >> you know who likes her. >> mort. >> thank you. >> what am i saying? >> mort zuckerman who owns the newspaper. >> i've never heard of this sports writer, never heard of him before, but he said something about rex ryan and sanchez getting, i think, i don't know, and the governor. and it's new jersey, you know. that's a new york newspaper. they hate us over here. you hate us over here. but you, you know, you're here a lot of the time. the future of video games -- where do you live? oh, never mind. you're young and single. the future of video games, "madden's nfl 25" being released today. >> we have thoughts, we have voices, we have feelings. >> i know your thoughts very well. you make it known in the mainstream media your thoughts. upper east or west? >> west village. >> oh! the outlook for the sector, next.

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welcome back to "squawk box." take a look at u.s. futures, u.s. equity futures at this hour. we do have some ugly red arrows there. the dow looks like it would open off 90 points. shall i say that again? 90 points. and the s&p 500 off by 12 points, the nasdaq off about 27 points. not so nice. making headlines this morning, a former ex-jpmorgan employee has been arrested in spain today over the london whale charges. javier martin -- i'm going to mispronounce his name -- >> martin-artano. >> thank you. is wanted by the u.s. on fraud and tax crime charges. u.s. prosecutors brought criminal charges against the spaniard and his former colleague in connecticut. i'm sorry, not in connecticut, in connection to the london whale trading scandal.

both worked for the bank's chief investment office in london. joe, want to talk video games? yeah, i do. i was just checking out -- >> futures? >> checking out the s&p. >> they're ugly. >> i wonder what's the total amount of the correction here? we've got to get below around 1,640 to get near near-term lows. it's 1,644, testing those lows from the last mini correction we had. video game season kicking off with "madden 25" today. joneth geller, i saw for madden he will be remembered for video games and not for football coaching, but my interest is more in the new consoles because i've been hearing about them from someone near and dear. xbox 1 is the next generation? is that what it's called? >> yes, xbox 1, a new playstation 4. >> they do different things, right? >> at the end of the day, they're gaming consoles, but

everyone's been pushing to own the living room, so these boxes are not just gaming machines anymore. microsoft and sony are really trying to own the entire living room experience. you have netflix on it. >> right. >> you can get your tv on it in some cases. so, this isn't just a gaming machine. >> it's bigger than that. >> why do you make the point that this could be the last generation? because somehow, ipads and phones are going to somehow replace these consoles? how would that happen? >> if you look at the computing power and the processing power of your ipad, your android tablet, it is very, very high. and i think the day in age of us needing a dedicated gaming console is going away, and that's why you see this push from microsoft and sony to integrate video-watching, movies, music, social experiences. >> so, you'd still get the console because you wouldn't get a gaming console anymore? >> well, you get the console because now you have something in your living room that connects everything you're watching. i think that's why it's very important to watch the space closely, why apple is rumored to enter, intel, a lot of companies really trying to get in there

because at this point, it's unchartered territory. >> how would you use your iphone to play on a big-screen tv on a ps -- >> so, apple has airplay, which is really cool. it uses wi-fi. and anything you're doing on your phone or your tablet will show on your big-screen tv. >> that's awesome. you knew this. >> you literally just need a control -- >> andrew's nodding. >> -- from your iphone or ipad. so it's a brilliant way to do it. >> that's why they're letting you lead this interview because i, like the viewer, am finding this stuff out. >> and you're trying to build a case to not get these products for your son. >> no, i actually, i don't know! i think i'm probably going to, right? but you could wait and use your phone to -- >> i mean, look, you're not going to have the same experience in terms of gaming for a hard-core gamer, but i think as we've seen over the past couple of years, casual gaming is a really, really big category. you know, you have two minutes to kill, you pick up your phone, you look at it, you play a game, you go to your meeting or go do whatever you're doing. so, i think the hard-core gaming is kind of slowly going away.

and i think this is going to be the last time that general consumers want to go buy these types of boxes. >> for xbox, it seems like a precarious time, too, because for recent years it was always synonymous with don matrick, the former ceo ofmaddrick is now the ceo of zinga. is that problematic for that unit or do you think they have stuff coming out in the next few quarters to make it worth their while? >> x-box-1. i think the games will be cool. i don't know if that head change makes a difference at this point. i think everything is kind of baked into the plans. i'd be more concerned after the xbox one comes out into the next console. i think it's a tricky area. if you lock at nintendo, the wi u, an absolute no it's a nightmare. >> microsoft might have a new ceo. there is also talk could the company get broken up. a lot of things may happen in

the next 12 months, would microsoft, would it be a good thing for microsoft to spin off the xbox as a gaming business, a completely separate business? >> i think that's microsoft's problem, the windows division are doing fine. they make revenue, profit. xbox breaks even or a slight profit. i don't know if you separate microsoft out, you still have phones, tablets, cs. i'm not sure how much that make sense. but they obviously haven't been doing too great with all those things. >> are you up to speed on the game? >> a little bit. >> have you heard of what is beyond two souls out yet? do you know what i'm talking about? >> i have no idea. >> my son, beyonce knowles, how about the last of us? have you heard of that? >> no, i haven't. >> beyond two souls big. i think the fifth, he's never had a grand theft auto, but the

fifth is coming out. i am hearing rumblings. he should not play that, should he, at 11? >> i would probably play at 11. >> beyonce knowles may contain graphics. this is like milely cyrus. it's a joke. it may contain content inappropriate. >> for me. >> they need to supervisors. >> you cannot do enough supervision. >> beyonce knowles. >> okay. thank you. coming up, a cnbc exclusive, treasury second jack lew citizen i sits down with our john harwood. that's at 7:00 eastern. stay tuned. you won't want to miss it. [ male announcer ] it's time.

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is. >> the worst year in baseball is said to be the most profitable. the houston astros are set to pull in an estimated 99 million operating a season, that's nearly as much as the operating income of the last six world series championships teams combined. they began the season with a league low 26 million active payroll. they got that down to under $13 million. which those people are close to it. anyway, individuals, coming up, quarterly results from luxury retailer tiffany. plus a cnbc exclusive, with

secretary treasury jack lew. skip to my lew at 7:30 eastern. ♪ ♪ ♪

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>> good morning, welcome to "squawk box" here on cnbcment i'm andrew ross sorkin. take a look at the futures. i have to say, it's a bit of an ugly morning t. weather outside not so great t. dow jones off 86 points. the nasdaq opposite 28 points off. the s&p 500 looks like it opposite 12 points. if we get it about right now.

we have a big morning on "squawk box." we are now 30 minutes away from john harwood's exclusive interview with treasury secretary jack lew. lew is urging congress to raise the debt limit as soon as possible and save the $16.7 trillion ceiling will be hit by mid-okay. that's the date and we don't have much time. so we will see where that goes. also, we got your morning headlines this morning, john harwood reporting this morning that larry summeomers. he is still being vetted for the job according to a source. also, former journalism p. morgan chase employee xavier martine artaggio has been arrested in spain this morning. he is wanted on charges in the u.s. connected to the london whale case. he turned himself into police after he was located and contacted authorities. we are watching shares of j.c.

penney, bill ackman sold his entire 18% stake in the retailer of resigning from the board two weeks ago. ableman first bought those shares at just over $20, well above where they are now. we have more on that story in just a few minutes. joe. the dow jones, our guest host, mark zandy's moody's economist. mark le monis is star of the cnbc series "the profit" john mortimer, wealth management and director of strategies. do you want me to come right to you, mark? what is moving the stockmarket? >> what is moving the stockmarket? that's a good one. yesterday, jeff, one of the things that i thought was interesting as bad as that durable goods number was, it

almost looked if it lessened the september taper, the market wanted to trade up until secretary of state kerry started talking about some type of maybe strike in syria. it almost looked like bad news was back to being good news, it would keep the spigot opened. did you view it that way? >> i think you are on to something there, joe. i think the market is trying to discount the amount of the fed tapering and when it will happen. it's sort of a perverted way, like markets have to do a lot of the time, they can rise on bad news given that the leg widity would continue to stay in the system. so we'll have to see again how the fed tapered the meetings in mid-september. kind of what those releases are and see how markets react. i agree with you. i think until kerry got up and spoke, markets were actually doing quite well up until the 2:00, 2:30 hour on the east coast time. >> jeff, we are all waiting for

the day when the fed can hand off the baton to the underlying economy. if rates are going up for the right reason, that's an improvele economy, improving profits, then we will be able to handle the tapering. the minute they see 280, 290, 3% on the 10 year, it's almost as if they discount what that means for the economy and immediately look at their own pocketbook and say, oh my good, it won't be $85 billion any more. that's what makes me think we will have to get through this tapering. once you get the shot, it's over, it's this looming thing in front of us. we can't get 18 traction it seems like. >> the take away, we must always remember that markets are discounting mechanisms and they are frying to figure out, especially short-term traders are trying to figure out what they all means for them. the 3%, i agree, it might be

more psych electoral college cal. we believe tear rates have begun their upward trend, rough numbers are 50 basis points the next few years. rates have to normalize, hopefully, they are doing so, because of the strength. >> we already got a couple year's worth. >> you may have said, again, 166 on the ten year, it was probably much too low, given the backdrop going on in the global economy at that point. so you have to discount, maybe it was 50 basis points too low. so i might take some, you know, i might disagree with you a little bit there. it may have been a false bottom. but i get your point we think again we are on that progression. we think we will have a stronger second half from a gdp standpoint as well. >> sorry. it's up? >> this is the kind of stuff, this kills andrew, you know what it means. income disparity, widening. >> people buying rings, getting

married. >> no, no, rich people. the high end, income disparity, american dreams dead. >> i have a statistic for you. >> well, i'll ask you. take the top 5% of the income distribution. what share of consumer spending do they account for? >> what do you think? >> not as much as people would think. >> really? >> give me a number. >> i don't know. 20%. >> no higher? >> i'd go 35%. >> exactly. 35%. what was it in 1990? >> 35%. >> no, 20%. okay. so it matters. >> it matters. >> and it's happening. >> it's happening. >> that's consumption, so you know the income, wealth, what really matters is spending. >> we hear this a little on the durable goods numbers. >> i want to hear. >> the capex at a lot of companies got soft. a lot of people saw earnings slowdown. they were worried how much money they were going to spend.

i think a lot of companies are pulling back the durable gods. capex companies are not expanding, boying the same amountf equipment. there is a lot of lead times, people waiting to see, what is my fourth quarter going to look like? is it time for me to refinance my debt? do i need cash on the side? i think that is keeping the durable goods numbers. >> you hang your hat on the 175. you think everything will always be okay because of the 175? you still think we're on track? >> i think we're on track. 175. 200 k. >> your recovery is on track. the fed will be able to taper. everything is going along as planned? >> everything is going to script. pretty much. i'm a little nervous about this rise in long-term interest rates. it's a little ahead of what i expected it to be. only a little bit. >> would you be with all your companies, would you be planning for the same economy? >> i'm nervous. i'm starting to think, do i make an acquisition? is it time to refinance? do i need to open this many --

>> for interest rates or the economy is recovering? >> for both. i'm not sure they're recovering as much as people think it is. i have seen the slowdown in my businesses. >> it seems to be small business versus big business. >> 25% of the rv market, i look at the foot traffic that comes through my stores. the ability to get credit for consumers. >> the rv. to me it's rv, house, a car, whatever you want it to be. >> it's very sensitive, i would suspect. >> people spending dischretienary dollars on things they don't have to have. it's a shocker for me to see that this early. >> you know what the flipside of what you said is, you know, i know you are fawn partisan, sort of. but what you just said was. >> i am non-partisan. >> exactly. >> what you basically said was we hear the tax cuts don't help for the wealthy. they don't spend their money. they bank their money. you said how important the high

end is to the consumer economy, we are told they don't care about payroll taxes. they don't care about tax increases, because it just gets banked anyway, the money they have. >> you made the case a high end tax cut would hurt the economy. >> it would. although -- >> it did. >> although, a tax increase on lower and middle house holds would be more damaging. >> even though you made the case it went from 30 to 25. >> say you raise taxes on upper income households, it will do damage, no doubt. because it is such a large share. >> it looks like it will do damage at 35% of spending. >> they will continue to spend. because they have savings, resources. >> you don't get tiffany buyers. is it a high end person? >> the high end. >> is that what you are sell something. >> that is something new to the market. >> are you selling the breaking bad rvs? >> not the breaking bad rvs. >> last week you said you

weren't. >> they got up a u all uppy cooking meth. it was a reference -- >> i can't have their near my business. i can't have it. >> it was another network i was mentioning. you are a member of the team. >> i am already a member of the team. >> you said the last 30 days, a noticeable weakenning? >> yes. >> so it's the traffic pattern that concerns me. it's the what leads me. i watch my phones the foot traffic. whether it's wal-mart looking at their volume or j.c. penney, we realize our business, it's about the foot traffic and the registers. we look at what is the average ticket. if it drops $4 or $5, it tells us something. >> i don't hear from the auto makers. >> the auto makers or retailers? . >> you make a difference. you no ewho we have today, richard engel, one of the best in the business. >> we were watching him last night. >> he got into syria and got

out. oh, thanks to, jeff mortimer, my man, i'm sorry. i started with you, though, right? >> yes. >> you got to talk? >> yes, i did. >> you'll be back, please. you are one of our favorites, right, andrew, isn't that what you say? >> yeah. >> okay. >> we'll have more from or guest hosts. thanks. up next, if profits take on j.c. penney, bill ackman selling his 18% stake in the company. leadership forcing his hand. find out if "the profit" would take a stake in the retailer next. we have been talking about it all morning, treasury secretary jack lew on the debt ceiling. why he is urging congress to raise the limit now.

. >> welcome back to "squawk box." let's look at the equity futures right now. shares of tiffanys we are watching. the luxury retailer earned 83 cents. we have been staying about 90 points into the red for the dow if it were to open right now. the s&p and nasdaq in the red. tiffany, the market is up 3.5%. it beat estimates by 9 cents. it increased its four-year forecast to 3.60 per share. that was compared to estimates. revenues for the second quarter were short of street consense it. currency adjusted of 5%.

it was a something the market was fairly pleased with, andrew. >> let's talk about bill ackman, hedge funds manager bill ackman selling his stake to jc penney. as for the company's filing. as j.c. penney reached the point of consolidate or die? our next host has thoughts on this marcus is here from "the profit." what time is the "profit on"? . >> 10:00 eastern. i want to be clear, it's my money. it's my money. >> it's not cnbc money. >> it's not your money, it's not the network's money. it will be joe's money next season. >> i thought those court shows like divorce court, i thought the behind the scenes, each side got paid by the producer. >> i don't get paid. if you can help me renegotiate my deal. >> you are now a reality tv star. what are you doing? >> i do it for free. over time as the deals get

bigger, i may, at this point. >> how is your wallet looking after this? >> a little thinner, car cash, which will be a great one, i'll make good money on t. last episode of the season, my favorite, i plan on making some real money. >> what a tease. >> i'm not going to tell you what it is there the first one. >> car cash. >> you were going to make enough on that to cover the others? >> i will make close to $10 million. it's car cash, an auto buyingch one-half, a mock of carmax. there is no inventory. i don't have to worry about capital. facilities are very small. it's a very quick inventory turn model. back to j.c. penney, so i'm a boyar if i own sear's. >> you are a boyar? >> so i don't really -- >> are you recommending eddie lam pert. >> i don't want to make recommendations to eddie loom better. he understands the consolidation play. for me, when i look at the

space, macy's has come in, wal-mart has come in, target has come in. they've taken the soft good spread of the 19 to $20 clothing stuff. what i worry about in the sears, j.c. penney model, every mall has a sears and/or j.c. penney. can they make it in the same mall? is this a ploy to renegotiate leases? i'm not sure what sears holdings play is. for me, the model looks the same the demographic of the boyar at sears and j.c. penney looks awfully similar. i'm not sure the market can handle both of them. >> beth are severely distressed companies. isn't it trial they get it right? >> two wrongs don't make a right. is there a way to consolidate those businesses, stream line the revenue, get rid of the sg and a, the fixed costs born in the leases. >> can i ask you a different question. >> yes. >> you are an entrepreneur, an operator. you look at bill ackman, an investor.

>> he thinks he's an operator. >> eddie lem better lambert thinks he's an operator. >> a smarter guy, though. he understands merchandising and inventory. that's his difference. >> how should we think about the distinction between investors who think they know what should be happening at these companies and the operating guy? >> what i always like to see is an investor who recognizes his or her role in the place, role in the business and for a guy like bill ackman, it's surrounding himself with good leadership at the operations level who can lead his business and understand he's the money guy the capital guy, he's not the guy that will go into the stores and tell them, your merchandising is not right, your marketing is not right. bill has done wit his wallet to say i'm totally out of j.c. penney. >> in an age of activism, do you look at investors and say, these are "fast money" guys? you should listen to them? or do you say they are bright

and better, in fact, than some of the boards do. >> let's look at berkshire, they make great investments. they surround themself, they boy great companies because of the management team. never any problems there. a big difference, bicker checks, too. >> you see like a nelson peltz, where would you put him in this? >> somewhere in the middle. >> so you rolled up camping stuff? >> i rolled up the mom and pop dealership. >> you saw how wayne did it in certain ways with waste management and autonation. and you know wings on swisher now to some extent. which is if you want to have your bathroom cleaned, there are a bunch of mom and pop operation. you can consolidate the whole thing. is there anything left fragmented? the funeral home was for a while? anything left that you would do? >> i'm not sure it matters what the business is, it allows what the execution s. a lot o are consolidation failures.

we will save money by putting our toilet paim, the key to consolidation is buying good businesses that have best practices and leaving them alone, maybe finding some branding synergyment if i lock across my hundred companies across the country. they may be in the same industry, they operate differently. >> it's management. >> it all comes down to management. >> of course, "the profit" 10:00 p.m. eastern time and pacific time. >> he has plenty of money. you could lose everything here. >> it would hurt. absolutely. >> it wouldn't hurt your life style. >> i wouldn't go to tiffany's. >> we are minutes away from an exclusive interview with treasure secretary john liu. up next the drum boats are getting louder for a response to chemical weapons in syria. we will speak to nbc's richard

engel. stay tuned. ♪ ♪ i've got something for you too. (announcer) fancy feast delights with cheddar. a meal that is sure to delight your cheese lover. now available in the classic form she loves. fancy feast. the best ingredient is love.

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so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. >> secretary of state john kerry says the attacks are undeniable

and the government should be held accountable. richard engel is just outside syria. i watched you last night, richard, and reference the last time you were on when i asked you whether you were going to head to syria. i was looking at a map. you were in egypt. somehow you got in on the more than border of syria. did you get anywhere near the, where any of this -- maybe you don't want to answer this, did you get anywhere near where any of this happened? >> no is the short answer. the, yes, we move around a lot in this business. we were in egypt for all of the incidents there. then we came to istanbul, headed down here to the border region between turkey and syria and then went into syria, but just mostly stayed in the northern parts of the country, meeting with rebels, moteing with refugees. they also believe that there

have been chemical attacks in that area. in fact, if you speak to the rebels, they talk about 30 different times where chemical we upons have been used by the regem. we didn't get to those areas. in damascus the latest atrocities lapped, the u.s. believe clearly was the work of the syrian regime, those areas are completely cut off. it is even difficult for syrians to get in there and today the u.n. inspectors were supposed to go into those areas. it was announced a short while ago, even they won't be going there to continue their work because of a disagreement over security. >> we didn't know, richard, i think, pretty well, secretary of state kerry basically said it yesterday, that we know. but is that enough given that there is the slightest, you know, plausible deniably russia has, discuss it matter to the

international community whether we don't foe we have documented proof? it's still not enough for us to convince everyone. will it be enough for the president to make a move, do you thin think? >> i think that is exactly the white house' intem jens right now. they have been briefed. they are completely convinced that this was a chemical attack on a mass scale carried out by the syrian regime. this was a missile attack, ground-to-ground missile. we have been told there were at lowest four different locations, all under groft control that launched these missiles into town. the muenks has incredible satellite technology. they have good technology to pick up conversations, radio chatter, private e-mails as well. so this wouldn't be the kind of thing that would be difficult to hide. you could see where missiles were launched, where they landed and what kind of effects they

produced. so i think if the u.s. says they have a good intelligence case, this is not like in iraq we are talking about maybe they were developing weapons in secret and we don't know about it. we could see where rockets were launched. we could see the results that happened in those areas and those results have been pretty clear. reason says there are doubts. many countries, the u.k., britain, france, israel, turkey, several arab states are completely convinced and support a punitive strike. not a long-term campaign, but a one-day campaign, a two-day campaign, that's unclear at this stage, something to show there has to be consequences for using weapons of mass destruction against civilians and doing it in a way where everybody can see it and causing hundreds, maybe even more than a thousand casualties. >> yeah. i, and i am told that you

couldn't necessarily knock out any of the facilities involved in the production of any of these wmds, but it would done just to hurt the regime to some extent. i'm wondering whether that, would that change their future actions if you did a two-day strike and bombed some facilities, richard? >>. >> it really depends on how far you go. if it's a symbolic strike, you bomb a few air fields, ammunitions factory. are you right, they are not talking about hitting the actual chemical weapons, they can relows them into the atmosphere and kill more people. if you do a symbolic strike, it won't change the calculus in the war. i can hear the syrian rebels saying, the open six and to cross the region that this wasn't enough. it was just a fig leaf that we

know what the united states can do when it wants to strike and u.s. credibility, the u.s. ability to deliver deterrents would be weakened. if the u.s. goes further than that. we are talking a several-day complain, zoisive campaign against the infrastructure of the regime, command and control, communication, weapons, delivery systems. then we could start to see major defections because the rebels will simultaneously launch an offensive. he promised. that he said as soon as these airstrikes begin, we are going to go on the offensive, hoping that the regime will start to show cracks. there will be major defections and the rebels are optimistic, it could be a turning point and with their help it could be the kind of action taco lapses the regime, going back to the first scenario, they think if it's a week symbolic strike or no strike at all, then it will be sending the message that assad

he got away with it and it might tempt him to do more chemical weapons attack t. scale and the degree of u.s. response will be very important here. >> richard engel, thank you, once again for your time this morning. we always say, just watch your back, be safe. it's a business network but we can't tie it to what happened in the market at this point, but it's just on its own, we would i think cover it. egypt suddenly is not quite as much on the front burner every minute. >> on the go at all times. we thank him for being with us. >> coming up next the interview of the morning, jack lew still in a meeting. we are ready to go. we will bring you that interview when treasury secretary is there. the economy the debt ceiling. why he is urging congress to raise the limit before it is reached in mid-october. "squawk box" is coming back after a quick break.

.

. >> welcome back to "squawk box." in the headlines this morning, we'll be getting fresh data on home prices later this morning t. home price index out at 9:00 eastern. it's expected to show a 12% year over year increase for june in the biggest markets. british prime minister david camm ron the latest toast weigh in on the u.s. assertion the syrian government used chemical weapons against civilians. it's an absolutely important situation to quote cameron and the international community must respond, they are weighing on investor sentiment, leading to a sell-off laid in trading yesterday. mcdonald's is adding chicken wings september 9th and at all locations by september 24th. however, it's a limited time offering like most mcdonald's offerings. it will take flight and be gone by the end of november. >> i leak. is there bleu cheese with the

wings? you need a little celery. that's saturday night. if i knew, i probably wouldn't have. oh. >> you would have had to have come to jersey. >> next time we have wings at our house. >> would wings be enough to make a trip into the city? >> no. >> what would have to be there? >> business. there has to be a good reason to go in there. zafdy. this is a convoluted way i'm going to ask this question. >> now i'm nervous. >> you know that lew when he was not in this position, secretary lou had at least. you know the administration well, he sort of had the reputation that maybe he would be less conciliatory with republicans in the house. he was fairly try de ly striden.

the president says he won't negotiate. do you think secretary lou will be more willing to try to patch things together or is it going to be a my way or the highway deal again? >> well, it can't be my way or the highway. they've got to come to an agreement. >> the president says he will not negotiate on the debt ceiling. >> not on the debt ceiling. there is also the budget. they run out of funding the end of september. they're going to probably combine the two. the decision will be around the funding at the same time. >> what do you think he will say to horowitz today? >> i think his point to go on tv is to say, we got a big problem with the debt ceiling. we got to raise this. >> you can never really separate the posturing from the actual negotiating that's done with trial balloons whachl do you think this will be today? mostly? >> i think he's laying it out there. this will be a big problem. >> do you raise it?

>> give or take, late or early november. it depends on revenues, frady di, fannie. >> in the grand negotiation, do you try to leave yourself little wiggle room? don't you say it's early october or middle of october knowing -- >> i think he came out saying late october, early november. >> is it then december? >> i don't think so. it's possible. splitting hair irs. >> about a month ago, treasury said it was going to start borrowing less and less. do you think it has no more accounting options left? >> i think they're running out of them. what itself the difference if it's november 4th or 15th? they got to sign on the dotted line. it's going to be combined with the funding for the government. they will negotiate around it. they have to come up with something, right? they can't sign a piece of legislation without something around it, with the word entitlements, tax reform. i don't think they come up with some big thing. >> this is the kind of

uncertainty that even the left acknowledges can hurt the economy. like for a long time, regulatory tax. affordable care act. no. no. the minute the republicans were at caught fault for threatening to shut down the government. that uncertainty, you were right there with. everybody expects. >> is this the uncertainty that could derail? >> only if they don't sign a piece of legislation. >> is that possible? >> it's possible. >> you don't think so at this time? >> no, politics are changed. whoever is down that path will lose. >> we got to go. we bought the secretary ready as we speak. we will have treasury secretary of the u.s., jack lew's name, a preview of tonight's episode of "the profit." our guest host has been here the last hour. we will get some final thoughts from him in just a bit. here at optionsxpress, our clients really seem

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>> let's get to washington and the treasury department. that's where we find chief washington correspondent john harwood and treasury secretary

jack lew. >> thanks, joe, thanks, secretary for joining us. >> it's good to be here with you. since you sent your letter to congress, have you spoken to speaker boehner and, if so, how was the conversation? >> i have exchanged calls. i did speak with other leaders. i think in general the news was taken as it was intended, which was sharing the information that we have. it means that congress doesn't need to act. i think it's helped framed how they are thinking of coming back in the fall. >> the speaker said his staff reiterated yesterday we need dollar for dollar spending cuts if return tore raising the debt limit. so some conservatives talked about linking the defunding of the aca the health care law to a riset this debt limit. what will happen to those ideas? >> john, the president has been very clearment we are not going to be negotiating over the debt limit. >> both of those are total non-starters? >> congress has already authorized funding, committed us

to make expenditures. we are now in the place where the only question is, will we pay the bills the united states has incurred? it is just the only way to do that is for congress to act. for it to act quickly. what we need in our economy is certainty. we don't need another self inflicted wound. we don't need another crisis at the last minute. congress should come book and act. >> is a clean debt limit with nothing attached to it the only kind the president will accept? >> i will reiterate. the president made clear he is not negotiating. since '70 to '89, every congress has acted to pay the bills of the united states. this congress needs to do the same. >> but you will negotiate over the budget which government funding runs out at the end of the month. >> yeah. we have been very clear for quite some time on fiscal policy, the president thinks the right answer is a balanced approach. we have pressed very hard for the kind of agreements that would do both, spending reform,

entitlement reform and tax reform. we hit a bit of an obstacle with congress, there hasn't been an openness to do the balance with the tax reform. the president has tried to reach out in every way that is possible to make it clear, he's looking for the sensible common middle ground. that's very different from do we take something as muhammadal as the credit of the united states and put it in jaep order or raise a question. i think if you look back at 2011, we see what the problem is when you can confuse the two. 2011 was the very first time in certainly my years in washington, three decades, where there was debate about whether or not to the default. it used to be the debt limit was treated as a deadline to force action to come together. in 2011, we actually saw the specter of default raised to something that was an affirmative position some were saying was better than the alternative. that was dang ruchlts we can't go back will.

>> given the stance the republican has taken, are you 100% confident this, in fact, will get worked out without any of the negative repercussions we saw two years ago? >> well, look, i think as i talked to leaders on both sides, there is an understanding of the seriousness of this issue. i don't think that the leaders are in a place where anyone wants a repeat of 2011. i don't yet see that they have a plan to avoid it, with i is one of the reasons it's so important for this emto come back in just a couple of weeks and get to work getting this done and trying to make the debt issue different from other debates that we have. >> what if the speaker calls you and se, jack, i want to help you, i know we have to raise the debt limit. i got to give something to my members or i can't get the votes. what do you say? >> look, i think we saw in 2011 the dangers, going down the path of having the kind of gloegs e negotiation over the debt limit have over other issues. the debt limit is just different. it's just different. there cannot be any question, but we are a country that pays

our bills. it's not as if we get to go back and undo the dmimts that we made. these are old bills that have to be paid. it is part of the rock solid stability of the united nations u united states that we always pay our bills and congress has the job to raise if borrowing authority to make that possible just as congress has the authority to authorize the expenditures in the first place. >> after september, is there any circumstance under which the administration would accept either a delay in parts of obamacare or a defunding of parts of obamacare? >> no. >> and what about, could the administration accept a continuation of the sequester as is with no changes? >> we made it clear on sequestration, we think the right thing for the country is to replace senseless across the board cuts which i should remind you are designed tob so objectionable to spur congress to come up with a more sensible plan. it's important to the replace them with balanced policies that

take medium an long-term action to put more sensible deficit reduction in place of across the board cuts that hurt us economically and over terms of national security. our goal going into this debate is quite simple what do we have to do to keep the american economy growing? we know there are things we need to do. we need to continue to invest in infrastructure and technology. we know there are things we ned to the for national security. across the board cuts are not the way to get will. >> is the only way sequester is replaced in whole or in part is if republicans agree to additional tax increases or could you see a trade of entitlement cuts, some of which your administration have said are necessary for the discretionary cuts we have seen now? >> john, i think there should be sensible blends approachs to medium and long-term deficit reduction. i don't want to get into the details of what package would be, because a small or large package might have different characteristics. you know, i think that the

president made clear he was going to make tough entitles actions, those require balance in terms of ref few for fairness and for economic results. that's what we need. >> so if you touch entitlements, there must be taxes with that? >> as i say, i try id to say, the big deal that people talk about requires a balanced approach with revenues and. >> a smaller deal might be different. >> i don't want to speak to a smaller deal. we have seen over the years, lots of different ways of approaching things that are smaller, but the key is balance. there has to be balance. >> chairman camp and baucus are pursuing a tax reform process, both, they're exploring corporate tax reform as well as individual reform. there is no bill yet. will is no action yet. you have watched congress for a long time. is this still possible to do in both realms individual and

corporate in this congress? >> i think that the president tried very hard just a couple weeks ago to make clear there is a path to do business tax reform. there was a way to do it so we could simultaneously do some other important things for the economy. invst in infrastructure, manufacturing centers for job training. i think there has been a convergence of views on the business tax reform. whereas i talk to democrats and republicans, there are a lot of ideas where i think progress can be made. on the individual side, it is a bit more complicated. it is intrinsically checked to the larger fiscal policy conversation, without additional revenues, i don't see a path towards comprehensive tax reform. one can see a path towards business tax reform, we use the one-time savings to do a few of these important things. congress, obviously, has been gone, so there hasn't been much of a chance to see if that idea has the ability to make progress, but you know i think

that for people in the business community who have talked to me about the need for immediate action to remove the uncertainty about corporate tax reform, business tax reform. there is an opportunity now. that's what the president was speaking to a couple weeks ago. >> our time is short. a couple things before i led you go. how concerned are you about the reaction of financial markets to two different events? one, the possibility of military action in syria and, secondly, the tapering of bond buying that the fed has signaled is likely to happen this fall? >> you know, i focus on the core economy here. i think we have to take every step we can as we make policy to try and keep our eye on the baum of what does the economy need to keep growing in the future. we have foreign policy decisions that are going to need to be made for reasons other than core economics and obviously we'll have to manage accordingly. in terms of fed tapering, you

know, as treasury secretary, i will focus on core economics. we've seen -- >> how strong is the core economy? >> i think our core economy has been growing in the 2% range and i think it's important to note that that's with substantial head winds from federal policy. some on purpose, some not on purpose. we withdrew the payroll tax cut because there was a short-term policy that had to be withdrawn as we started to see economic growth. the across the board cuts of sequest trapgs are an unintended self inflicted wound in the short termment they were manet to be replaced by medium and long-term savings that would be a better path to the future. in spite of those drags on the economy, 23 are seeing 2% growth. as we get to the end of the 84, we think without the head winds of additional federal cuts, the economy should pick up a notch again. you know, i think that one of the really important things about the debt limit debate, all these debates is we in washington have to be careful to

be a part of the solution, not a part of the problem. these kind of manufactured crises, last minute decisions put the country on pins and needments and people make economic decisions in a state of uncertainty. we have some control over that. i hope congress will act quickly to settle markets down so they don't get worried about these positions. >> could larry somers be an effective fed chair if he is the president's choice? >> john, i will leave my comments on fed transition where they belong, in the oval office. >> how soon will we know the president's choice? >> as soon as he makes an announcement, he will make an announcement. >> a pleasure to have you with us. >> thank you. >> up next, final thoughts with one more guest host, "the profit" marcus lemonis. what will happen to the economic recovery, if rates push higher. we will discuss that ahead of the home price index. we'll be right back. you think about risk. i don't like the ups and downs of the market,

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. >> it's time for final thoughts of marcus lemonis, he's the host of cnbc's "the profit" it airs at 10:00 p.m. eastern time. >> tonight is not about as much as the businesses have been. this is about bullying in the work force. when we were kids, we saw bullying in the school yard. we are now seeing it in business. one of the messages i want to make clear today and going forward, this kind of behavior,

no matter who you are, no matter what kind of company you own, what your role is unacceptable. i tell people, if you are bullying, i will come find you. >> you have any bullies that work for you? >> no, i don't. no matter how well people produce, if they are a bully, they got to go. >> bass you smile you because you smile, are you not a bully. >> i am slapping the guy around that bullies. i do take some pride in that. it's a little of a wood chip. >> you have to be tough with this to turn these companies around, too. there is a lot of ingrained behavioer that will not cut it. >> with this particular guy tonight. i hope people watch it for that purpose alone. this is one of thegies you want to take out to the being of the wood shed. >> is he that bad? >> he's that bad. he does own the place. i don't know how his business will do. i couldn't imagine people would want to take their dog there. it's bad. it's bad. >> you should go to washington.

there's lots of bullies there. >> you did buy the company? >> i did not. i did not. >> watch "the profit" tonight. in the next block, we will talk housing, economy and much more, our exclusive interview with jack lew. we want to thank marcus lemonis, "the profit" for being with us. futures right now are still in the red. "squawk box" will be right back. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share...

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. >> treasury secretary jack lew in a cnbc exklausive. >> john harwood joins us to be right back down the interview. >> we will talk to two strategists about the looming debt battle and the next fed they were. >> jane wells joins us from the largest farm show in the country. >> she said there is some story she hasn't told me about. >> back it up, beep, beep. >> she'll bring us the forecast for crop prices and the outlook for farm equipment makers. the third hour of "squawk box"

begins right now. ♪ she thinks my tractor's sexy ♪ it really turns her on ♪ ♪ she's always staring at me ♪ while i'm chugging along ♪ >> i brig big green tractor, jason aldean. welcome back to "squawk box." first on business worldwide, i'm joe kernen, along with andrew ross sorkin. our chief economist mody's analytics. we will talk a lot more about the exclusive interview that you just saw, john harwood and treasury secretary jack lew, first, though, andrew has a recap of your morning headlines. >> we are watching shares at tiffany's after mixed results. tiffany's earned $83 cents per share, they also increased its full-year forecast to 350 to

3.60 per share versus estimates of 3.53. however, revenue for the second quarter was short of the street consensus. take a look. >> thank you, andrew. former j.p. morgan chase employee xavier artaggio is wanted in connection to the london whale case. he, himself, turned himself into the police after he was located and contacted by authorities. meanwhile, we are also watching shares of j.c. penney this morning. perching bill ackman is selling his stake. you can see shares down 2.3% in the premarket. ackman resigned two weeks ago. he first bought the shares at just over $20 per share, well above where they are at barely $13. andrew. >> a check on the markets. we have red arrows. dow jones looks leak it opened off 80 points, s&p 500 off 11 points. the nasdaq offant 25 points. if you flip that board off over to europe the dak is off about

1.6%. the kak is off 5.6%. maybe jack lew's comments will turn things around. >> are you joking? >> i was trying to be somewhat sarcastic. >> you need to sounds more sarcastic. you are very ernest. almost all the time. >> the interest did get slightly worse, before the interview they were down 64 points. down 80 points. >> anyway. hopefully you saw secretary jack lew telling the cnbc the president won't negotiate. john harwood joins us now with more. most of the stuff, john, some of the stuff is to be expected. we heard it the last time the debt ceiling was an issue. and that is, you know the stuff we hear over and over again. we already spent the money.

this is about spending the bills. was there anything out of the ordinary or that we hadn't heard before that struck you, john? >> well, i thought it was clear, joe that, the administration is opened to negotiateing on extending cost funding and the nature of continuing resolution, a temporary extension, whether it includes tax increases or not may depend on the size of the deal, whether it includes entitlement reforms are an important element in that. jack lew said the administration under no circumstances would accept a delay or pashl defunding of obamacare, which many conservatives talked about. what he did make clear as the president has in the past, inlight of what happened, we had the downgrade and the white knuckle moments in 2011 is they simply will not negotiate on the debt limit. here's why jack lou said that's the case.

>> i don't think that leaders are in a place where anyone wants a repeat of 2011. i don't yet sigh they have a plan to avoid it. which is one of the reasons it's so important to the come back in a couple of weeks and get to work on getting this done and trying to make the debt issue different from other depayments that we have. >> now, this, of course, has been the situation that the leaders have faced over the summer, yet, that i are committed, republican leaders and democratic leaders to not shutting down the government and not having the debt crisis t. challenge is, where do you get 218 votes in the house and 60 votes in the senate to get that done. that's the challenge that awaits us over the next couple weeks. >> do you think it's significant that you would run a head loin when administration says it's possible we might open just a

crack to negotiating with the other side. when that becomes something so different in the past and an actual head loin, you know, we might actually troy to negotiate something instead of standing mixed on all the demands to me, that's a sad state of affairs. >>. >> are you talking about negotiating on the government funding or the debt limit? >> with republicans on any context. >> they will definitely negotiate on government spending. you know, one way, one reason that this, the line is not as firm as it may appear is that we've got multiple things going on at the same time, extending funding for the government t. fate of the budget sequester and the debt limit. when you roll all those together, significantly, jack lew said in his letter to congress the moment when it needs to go up, mid-october, that is closer to when

government funding ends out the end of september. most poem thought it was likely to happen in september. means it will get jumbled up. not negotiating on one doesn't 3re cloud guesses on others. in the loins of congress, these things get -- >> stick with us, john, let's get some more reaction. secretary lew's comments, joining us now is joe watkins, a former white house official, jimmy williams, msnbc, a contributor and former senior adviser to senator dick dur bishop. you probably confused john a little bit, joe. haven't presidents in the past sort of, i don't know, maybe tried to do a little bit more, not a lot of speeches and campaigning, but maybe actually work behind closed doors with the other side to see what can get done? >> you are hitting the nail

right on the head. what has happened traditionally in this white house unlike other white house, the president when he wants to get a message out, rather than talk to members of congress and work out a dole. what he does, he guess on the road and makes speeches. speccing to the choir having them applaud you for why congress isn't moving the way you want to move is analogous to taking the knee at the 5 yard line. the president needs to be talking to congress. nodes to engage members of the house and not. he should have spend time playing golf to talk about what we do and how we fix obamacare. what can we do to make it viable as opposed to where it is now, that it will cause disaster for our economy. >> he should have been talking to republicans all summer. >> jimmy, whatever has caused it, are there so many sobs on the other side that the president shouldn't even be expected to at this point?

is that what you would say ojoe, that he's tried, there is no point to it? a lot of people in his party stel tell him, don't go talk for the these guys? there would be no point to it? is that yourancer? . >> when a child touches a burrow, a stone stove and bunks his finger and touches it again, at some point, you will run out of fingers to burn. i suppose. >> come on, jimmy, the republicans were after bill clinton non-stop, yet, bill:t passed relevant fair reform, as a matter of fact, he gave us a budget surplus. >> you are right. joe makes a very god point. which is the republican house and senate, impeached bill clinton. he's still worked with him. i'm not sure why he did. that at separate issue. >> okay. shouldn't stop you. go ahead. >>. >> i want to make one point the most important negotiation and could have going on this summer

is within the republican party. correct. >> you remember. they passed the ryan budget earlier this 84ment then they go through the process of trying to pass the appropriations bill matching that ryan budget. just before we went on recess, the republican house would not pass the bill the republican appropriations committee prepared based on the ryan budget. they have to physical out their own stance, people like john mccain and lindsey graham say, get rid of it, we don't like the defense cuts. haed this meltdown on within the house on the transportations bill. they've got to get their own stance together and it's clear that the republican leadership does not share the desire of some of the could have been servetives, rand paul, others who say, we'll fund the government if they defund obama care, republican leaders say we

can't get the votes, they say, okay, we'll attach that to the debt limit. it's hard for the president to go esht in that circumstance. >> can i make a point? the debt limit has never been a matter of goes, historically, or should it be? we shouldn't be debating the debt limit. that is something whe have to do. >> it's reasonable to debate everything else. we should be debateing the budget and future tax spending and policy t. dent limit that has not. >> john, are you in the camp that the president has been left with very little else to do than go speak to a different university. he will have applause and stay if campaign mode. has been his only option, the other side is in disarray, so there is no negotiating that could have been done, that what you are say something harwood? >> well the other side has to get their strategy before they can make real paroling. when the other side is at least a significant minority within

the other side is incysting on a stance, which is so far away from what the president could accept, like say, we'll get rid of your signature achievement in order to keep the government funding, the president said, hey, that itself not reasonable. >> i have heard the word balance in every proposal for the last two or three years. balance, i know what it means, it moans revenue increases and taxes. every single thing he has put forth, the word balance has been there. we all know what it money, every time. this hasn't been a whole lot of room for movement there. has there, joe? i don't know, is it just me? >> i think, joe, what i think is the fact that jan harwood has spoken clearly and truthfully about some of the disagreements, even within the republican ranks. all that means if are you the president of the united states, if you see that disagreement among republicans, there is rom to negotiate, then you can start

talking to folks. to not talk to anybody i think puts us in a terrible position. the position we are in right now. it doesn't have to be. the president can lock back. >> well the white house has talked to a group of senate republicans in exactly the kind of strategy that joe has mentioned. dennis mcdonagh the white house chief of staff, republicans like bob corker and others have been saying he has been very solicitous of them and open a conversation. there haven't been a lot of specs or they haven't made a lot of headway. they are reaching itr out so some of those people they can i they can work with. >> champ rodgers, as john just mentioned, this is a very important point, which goes to the internal struggles in the house gop caution. he put up a bill in the committee on the thud bill, the trpts bill.

they couldn't get it out. those numbers are determined by the budget. paul ryan's bungt. of which every single mebl of the house republican caution voted for that budget. so they voted for the budget. then when the numbers come down to the appropriations committee that, number says it's this. he can't get that out of the committee. there is not enough spinning for them. the second point is, they asked for sequester. queer sitting in sequester. next 84, it will be $110 billion bucks. we know that is the law. you will get 1 trillion debt reduction. they asked for it t. president signed into law, which i felt was foolish. now they have this. if you want spending cuts, they're there already. they are sitting under your photo. let mem them go. >> you hate those. >> 1.4 trillion to 643 billion. that's since obama came in. >> i know you hate it, you will take credit for it.

man, oh, man. >> i love you, joe. >> i love all you guys. >> this is a conversation. ? is what's happening. >> right? it's happening in america. a sad commentary. >> you know what, i saw it on andrew's face. >> depressing. >> why? we have al accomplished so much. >> depressing. >> look at the deficit reduction ha has occurred over the last three years. take it forward. it's 4 trillion over ten years. 4 trillion over ten years. >> you like it. jimmy likes it. yoep i don't understand it. >> the process is ugly. at the end of the day, we actually accomplished something. >> it's good, jimmy? >> 1.4 trillion when bush left office? today 643 billion. that's the number. >> is that good? i think it's fantastic. we should get below 500 billion. should put us where we were before the bush -- >> joe. >> i don't think the white house

nodes to unsettle markets any more than they are unsettled. lock at the economy,ist very weak. a lot of underlying weak inside in the economy. why do we need this? there ought to be a negotiation, a discussion. we ought to have a chance to avoid the disaster let's go back to two years ago, i was luxuriously sitting on nan tuvenlth i had to leave to fly back to new york about how the republicans were taking us to the brink. i don't think they want to go there again on this one on the debt ceiling. i don't. >> your vacation was disturbed? >> i was furious about it. it made me hate the republicans even more. >> when will you hearn the chops to go to martha's vineyard? >> i'm a moderate democrat. >> i can attest to that. all right. john, good, thanks. it's like having the treasury secretary on "squawk box" as well as joe and jimmy.

we will sy see you later. >> you like having the treasury secretary on. still positive? >> yes. >> we'll seal be talking about that in the next hour. >> i think i said that off camera. he didn't say. i think you opened up the discussion. >> i think you are right. >> do you think he said anything? >> i think the market will be relieved. >> i didn't 93 he was going to say na. >> wow. i'll let you go off cam and collect your thoughts. meanwhile, coming up, corn prices in focus at the farm progress show in decay tur, illinois? i forget which is which. but that's >> decay tur. >> lie ma, ohio. it's for sale. >> whole get jane to pronounce that for us. hey, jane. >> hey, kayla. lima, ohio. this is the real american

people. 125,000 farmers and others will be out here kicking things like the statement of the art tractor. we will plow one into the outlook right after the break. .

. >> welcome back. the price of corn falk nearly 30% so far this year. a lot of our reporters when they get like really important and seniority and everything like that. i don't mean age. they get that, she's constantly on a farm or in front of a big pig at a country fair or something, jane wells joins us now with more from the country's biggest farm show. these are your ideas,ant they, jane? what's the story? >> these are my ideas. these are my people. this is america. this is where it puts theed if on the table. >> right. >> gets people off to work. i love it. but we're going to have to see

what happens in the future here. because corn prices are actually heading being up to close to $5 again. we will have a hot spell in the corn belt this woke. still it's unlikely we will see $8 corner any time soon. that can make it a challenge to sell these state of the art tractors. it's their brand-new series up to 590 horse power. it is a monster. here's a deal. if you look at the stock chart rpths it has been a god run for a lot of these equipment manufacturers. they've had record revenues, strong orders. most analysts think the buying cycle is peaking. we could see a dip in 2014ment they are down, ubs predicting a sales drop. as farmers anticipate lower cash receipts and farm income. you don't want to spend as much. you don't need to deduct as much against your taxes. one thing they are selling now is the next evolution, which is

more efficiency for precision farming. tractors which drive themselves through satellites or technologies that measures the best yields on your farm. we have an old faxed windows bootle. they have an open platform that works across many different pieces of equipment. they are working with apple to develop it. but deer is going the more traditional apple route, developing its own proprietary closed system, allowing others to provide apps. think itunes, wireless data transfer is the big new dole, many farmers thumb drive a tractor and don't do anything with it. listen there well, now, we will be able to wirelessly transfer that to a website. we call it my john deer.com. then the farmer can access it on his hand held device, ipad or his home computer and we really are i would say the support ore of mixed fleet on the farm, we

are collaborateing with other types of equipment manufacturer. the foreman benefits versus lock them no one core eom. >> okay. but farmers need to be convinced their data will be secure. is a challenge. dave stewart finally pulled the trigger on a $15,000 system, which led to monitor yields across his acres of corn and soy beans. it is mostly telling him what he already knows. >> i can show that to my landlords. they will say, i want that 200 bush el corn on all of it. this area here needs attention. and we will. they're all very understanding. >> look, here the computer says. >> i don't have. i have been telling you this for 40 years. this is real now. s so. >> all right. later on "squawkon the street," if we had put our 401q in illinois farmland five years ago, we wouldn't have to get up

early anymore and come to work. >> i say it's great. when you think about the malthusan predictions. you watch the way these guys maximized deals, it gets more will you, more and more efficient. >> it is amazing. through the satellite technology they can move them to within an inch, it's better on fuel and efirntcy. when you talk about efficiency, this is the one place where you have nobody flain complaining about gomcs. >> jane, this is all satellite-based. it isn't your verizon letting you steer it in the middle of the field? >> the satellite is directing it where to go. you have things measuring terrestrial or satellite. the key is to combine this information and share it among

pieces of equipment even with your dealer. they don't want to share information. they have to be confident the data can be kept private if they wish it to be so. >> yep, it's amazing. you kids, it macs me proud, doesn't it? have you ever been -- probab probably -- have you ever seen an animal? >> i used to milk cows in the summer. >> you used to milk cows in the summer. vermont. >> picture it didn't hap. >> here's my big fear, my big fear is later within i ask for video of corn and soy bean the editor won't know the difference. i apologize in advance if i talk about kompb and you see soy bean. >> all right. thanks so much for that, jane. we lock forward to your reporting throughout the day. coming up, we will talk about apple, which is sparring with the government over changes the company will have to make after being found guilty of

price fixing in the ebook market. we will talk with analysts, how it is protecting the tech giant's bottom line when we get back. ion tomorrow requires challenging your business inside and out today. .

. >> welcome back to "squawk box." apple's program was supposed to begin if june. they have shown initiatives with

employees. apple customers will be able trade in used iphones for credit zbordz a new one. the opening rounds of the u.s. open featuredage i tannial -- italian francesca. there trksz back to the ballboy for an hug. williams cruised to victory in the match. >> let's get, yeah, u.s. open time. you willb there. right? >> i have to find a way, yeah. >> that is -- >> i like the cnbc, man, and those lights. this and wimbledon, it's a great thing. >> oh, because i do it with a t? i pronounce my ds with a t and my ts with a d. >> my mother said it doesn't matter. let's get a check on the markets.

rick santelli joins us from the cme in chicago. we had secretary treasurer jack lew on, rick. did you get to watch that at all in. >> no, no, i didn't get to watch it. tell me what he said. i know he usually pours out lots of information. >> i don't think, that was sar castic? >> yes. >> a little smirk on his face. >> he said in the united states we pay our bills, i always love that, is that congress spent all this money, all we're trying to do is make sure we pay our bills. you always hear that, don't you? >> yeah, you know, it's one of those real three card monty deals with the show. you can't stop the spending and mr. lew would understand this dynamic. i think i believe bob woodward, he was the scientist behind the sequester. but you can't stop him from spending and once they make the commitments, then, of course, they, they, meaning anybody involved in the buckary process

say you can't stop the government. you have to raise the debt ceiling. we all know that it's not publicly or a media standpoint a winning standpoint. at some point it needs addressed. the topic is japan reaching their debt, reaching big levels of debt. i think it's a bit had. i think we node eed to deal wit this in an honest way, the notion, after some of the ideas about how debt slows growth. everybody wants to change and change the face of us a territory. but i think, you know, let's take a back seat and be an observer to what is going on in japan. they had a slight bit of december of what they are trying to do with stimulus and following our fed's directives. but it doesn't seem to have worked exactly the way anybody would have designed it.

here they now sit, exploding the deficit, raidsing taxes is the next thing to do. obviously, they're much more on the governor brown model than they are on the taxes of texas or -- >> balance, balance. >> faveness, balance. >> ba are you arguing for? it's going to be balanced and sensible. are you arguing for unbalanced and unsensible? are you stupid? >> hey, joe, you ever meet people, you will be in a conversation, they go, listen, trust me on this -- when somebody comes out with anything too quick in a conversation or a relationship or a friendship or in a political relationship, that's when i kind of pull back. i would assume that people are going to be fair in government that are trying to serve the people and the more they remind me, the more i know it's disingenuous. >> all right. thank you. >> one more thing, joe. >> go ahead. >> you see the yield? look at your screen. >> 2.77 earlier. where is it now?

>> it touched 2.74 and three quarters, hovering at 275. this is a hugely significant area. if we start to slip below this, look for done sol days ago, when i say slip below it, closing basis mostly. >> i like it. we'll be watching it. it feels like the fever is breaking. breaking for all the wrong reason, hey, they won't do it in september. whohoo! >> it seems like we are getting involved in a war trade, too. i won have guessed we would be anest sized to homogenous sizes. political forces changed. i would say right about that, rick. >> will they or won't they taper, debate continues. >> yes. >> for all the wrong reasons. meanwhile, coming up, the department of justice outline, changes it wants apple to make in the e-reader market, saying they colluded to drive up the profits of ebooks.

story and a whole lot more coming up next. ♪ ♪ i've got something for you too. (announcer) fancy feast delights with cheddar. a meal that is sure to delight your cheese lover. now available in the classic form she loves. fancy feast. the best ingredient is love.

. >> welcome back to "squawk box." let's get to the broader implications of this and more

from our next guest joining us from stanford is daniel ernst. help us make sense of this. this decision, they lost this case on the ebooks means what to them, ultimately? >> well, actually, ultimately, i don't think it matters at all. particularly with the stocks at 12% earnings, the run from 400 to here, there is a plethora of potential product catalyst sitting in front of us, a watch, tv, mental improvements, which i think people misforecast the potential for those things, china mobile, japans, there are so many things in front of apple, earnings, 2.5% dividend yield t. fact that government wants to get involved in how content pricing for books. >> ultimately, let's just talk about the implications. this is the issue. we talk about ebooks.

people, you can write off the book market and say it's a tiny piece of their business. ultimately, if they get into the tv business, the they partner with others on content, you are now having the fwft have minders literally sitting in cooperty no watching over there -- coopertino watching over them. how does that make their ability to purview some of these options? >> i think that would be a lot more troublesome to the parents of cnbc at comcast if the government has to come in there and say, you have to carry it at this channel and this price. you can't be a part of that process. the consumer can't decide. if the consumer doesn't like the pricing on ebooks, two to the library, amazon. i don't get it at all. >> of course, the government said it was illegal, having said that, to then try to go into the

tv business, for example, up in that business, you imagine they will have to make deals with different providers. will be made more difficult by the fact the government will be sitting there looking over their shoulder in a much more aggressive way than clearly they were before. >> well, i think it's especially the content holders that is a much more tough nut to crack for apple in going to the tv market than it is worrying about what the government metro detroit do. so i like to believe that eventually rationality, i know when it comes to government, that's not always the case. but we don't have at love examples of government being involved in content pricing. so i reasonably expect we will not see that again. i really don't think it matters for apple here, sitting in front of a whole bunch of products coming out. >> real quick, on content, walter isaacson our friend that wrote the book on steve jobs.

he talked about how he'd cracked the code. every analyst says the apple tv is coming. yet, here we are. what itself the problem? >> well, i think the reason why it hasn't come is the point that you made about they're having to negotiate the contract. the tv is easy, right, look at the iphone, the ipad. they have the best interface. my 5-year-old boy came here and said why do you weed netflix from the ipad? he said it's too hard to use the tv. it's so funny, apple hasn't fixed out how intuitive, the mac operating system, they made it easier to interact with technology. that's the easy part. apple has clearly done that. i'm sure it's in the labs. the real issue, the only way that's an interesting product for them is if there is a full suite of content on that.

it's a tough nut to crack. >> it will take a force of personality. thank you for joining us. we appreciate it. >> coming up, the home price numbers set the tape at 9:00 a.m. eastern.

>> back to "squawk box." the futures are hitting session

lows, right now down 1.17 on the dow on worries of a possible strike, which could be forthcoming in syria. in fact, the wire services currently western power has told the syrian opposition to expect a strike within days. according to sources that attended a meeting between enjoys and rebels. the opposition was told that actions to deter chemical weapons could come as early as the next few days. they should prepare for peace talks in geneva, which might get messed up if the russians and chinese follow through on you angry they would supposedly be. >> are we supposed to be doing something? >> don't look at me. no press, please. >> don't look at me. from blue velvet. >> we are watching the housing numbers. they are due out in 15 minutes. joining us to talk housing is

david bernsen, senior vice president of nationwide insurance and former economist of fannie mae. thanks for being with us this morning. i know there is an expected increase in the houses for june, case schiller, what are you looking for in that? >> kayla, i think that will be exactly right. this is june so home sales were pretty strong in june. will is a lot of momentum, positive momentum with home prices. so from a year ago, a 12% gain is very reasonable. >> to what extent is a lagging indicator. home sales were positive in june. in july, existing home sales were still good. but how should we be interpreting this number in terms of where we are right now in the housing recovery? >> it is an indicator that's a couple months old. we are almost in september. this is a june home prices. if you see them today, it

probably wouldn't be as strong. even if housing demand is starting to fall a little bit because of the rise in mortgage rates, we probably won't see it in prices for a number of months. >> so when do you expect the rise in mortgage rates would trickle through to prices? in the last three months, we seen the rate rise by 100 basis point, that has to hit the home buyer at some point, david. >> well, it has to hit the home buyer if there are other things that don't offset that. historically, we had a stronger economy to go with that. if we get a pickup in job growth, that can offset the mortgage rates. the problem is, we have not yet seen the pick up say in payroll employment and so the rise in mother-in-law rates you see it prex with the nba mortgage applications is tarting to hit housing. i think where we see the fall numbers for prices, if housing demand has not picked up, we may see home price gain slow.

we will certainly not be looking at home price decline, perhaps gains of 5 or 6%. >> david, what mortgage rate would do real damage to housing demand at this point? given what you know about the job market and credibility and the factors that matter? >> well, mark, i think we are close right now. with mortgage rates between 4.5 and 7%. if rates went up another 100 basis points and payroll gains stayed where they are now, i think we could see housing demand slip a fair amount. on the other hand, we seen the unemployment claims trick him down. they're the lowest they have been since before the session began. if that discuss translate, it would pick up this fall in payroll employment, we may not see any decline at all. over with the rye in mortgage rate, we may see housing deman pick up. >> there is a lot of concern about mortgage availability,

particularly for first time home buyers. is that something you think is of concern and what's going on there? >> you know, i have been very concerned about that. my biggest ken about the housing market. there were some indications that credit availability is starting to ease a little bit. you can certain lip see that in the federal loan officer survey, where we are seeing banks offering easier term for emergency, so i think that it's probably a little easier to get mother-in-laws now than it was. you think about the housing boom, we had the mirror test. if you were alive you could get the mortgage. it was that far in the other direction. we didn't move somewhere in the middle. it's still very tight to get a mortgage. we're getting closer. >> david, we are five years from that mortgage bust. you were the chief economist at fannie mae. next week is the five-year anniversary from when they took fannie and freddie into conservatorship. in one word, how kould would you

describe that? >> in one word? i'm not sure you can do one word. slow healing. >> david bernsen from nationwide, thank you so much for being with us, david. >> getting ready for the trading day ahead and we will check in with him at the new york stock exchange as we hit new lows right now. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. i've been doing a few things for playing this and trading.ove-- tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550

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welcome back to "squawk box" and futures right now are continuing to weaken a little better than they were -- well, 128, and this jim krcramer can attest, it is not because of the 10-year which is moving the right way, but the yen is surging, and this is about syria today, jim. once again, we can see how events in the world really do dictate what traders are thinking. no doubt that's front and center today. >> right. i mean, it looks like a spillover from europe where they decided to sell that market. we've been up a lot and the market has been soggy in the last three weeks, but it does not need that news and the jack lew interview was not reassuring to me, because it was business as usual and come back september and september is awful because

of what we do, and of course, he did not say that, but syria and the government coming back and it is a kind of a time of thin market where you can expect some pressure. >> yeah. did the durable goods number is always volatile, and zandi is here, and says we should watch 175 and as long as we are at 175 things are on track, and he says that everything is on track. what you think? >> well, look, i don't think that things are good or things are bad. yesterday, you talked, joe, cogently about how the bad news is good news and get 275 on the 10-year, and maybe down to 260 and oil under 110 and we do what we do in syria, and maybe anew. but i don't like it when washington comes back, because it is very obvious from the e e beginning that these guys are at war again and you know, joe, come in and a bad statement and syria on the agenda for a long time and iran, and we will be fight it with a couple of good turns in china, and europe, and a tiffany here or a tjxx there

and not enough. things are on track meaning that we won't go down 5.7, but not up here. >> jim, the battle in washington, and that is kind of consensus, isn't it? it is baked into the market. does anybody expect anything different from ta? >> well, no, the confidence when i look at the retail in the last couple of months, they have the confidence to buy the hard goods, but i don't get the sense that people are feeling that good. look, if we have a good employment number next week, and we hear any movement at all out of washington, then that would be upside, but still, mark, when we have washington at war, and we have had big declines because of washington and few advances because of washington, and so business as usual is not inspiring to people, when we are trying to get to 2% gdp to 2.5, you will be back at 2%, and i'm concerned. i'm concerned about housing, because the home builders say it is ter rifx and the guys who

bought them and rent them are terrific, and things are not terrific. they are not as good as they were. >> and jim, the best over the next three years is to raise the debt ceiling when we needed to, and no grand bargain and none of that happen, but then i'm thinking that the discretionary spending is shrinking and the sequester is going to cut the debt and maybe we would do okay if we didn't do anything else. well, i don't know. >> i'm with you, but i want washington off -- i hate it when washington is on the business section, because the name calling is horrible and i think that your analysis, joe, is rig right, it is not that bad, but when you get the partisan conflict and something in syria and funky earnings, it is difficult to mount a big adva e advance. >> yeah. i think that we are not that good of friends with russia and china anymore, so i'm wondering about that? >> no, no. feels like 1977. >> thanks, jim. >> you're welcome. >> and our guest has been mark zandi from moody analytics who

started his own business and then sold it to moody with 120 employees. >> good the know that. >> he is shocked. >> i'm not going to -- >> and especially that he has a lot more than i counted on. last word when we return. when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven.

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thanks to our guest host

mark zandi of moody's analytics, and it won't be a long good-bye, because you will be here a week from thursday, right? >> next week. >> yes, the gdp and the jobs report. >> you were awesome. >> thank you. >> you have always been a friend of austan goolsbee. join us tomorrow, and "squawk on the street" begins right now. good morning a few weeks become tu boys are back together and what a morning for it. welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. we are looking at a selling as the market prepares for a potential u.s. strike in syria, and the return of debt ceiling draw marks and we have case-shiller home prices hitting the wires and robert shiller is coming up in a moment. 10-year yield down to 2.76 and europe in the red as well despite a strong german business confidence survey. and the road map is